U.S. PPI Flat in May as Inflation Slows to 2.2%

• U.S. PPI unchanged in May, missing forecasts while annual inflation slows to 2.2%.
• Diverging goods and services costs add complexity as markets hold steady on Federal Reserve rate decisions.

On June 13, U.S. producer prices remained unchanged in May, defying expectations of a 0.1% rise, while the year-over-year Producer Price Index (PPI) eased to 2.2% from April’s 2.3%. This stagnation, also seen in the core PPI which excludes food and energy, signals continued relief in wholesale inflation and highlights a shifting landscape marked by mixed pressures in goods and services costs.

According to a Reuters report on June 13, the data revealed diverging trends. Final demand goods prices fell 0.8%, largely because of a 7.1% plunge in gasoline prices, but the cost of final demand services was unchanged.

This PPI data aligns closely with the May Consumer Price Index (CPI) report, which was unchanged and showed a 3.3% year-over-year increase. Meanwhile, core CPI climbed to 3.4% annually, its smallest annual gain since April 2021. Together, these figures underscore the complexities of the current inflation situation, as they reflect the effects of shifting prices in energy, food, and durable goods.

Despite the flat reading in producer prices, market expectations for Federal Reserve policy remain largely unchanged. According to Bloomberg analysts on June 13, there is a minimal probability of a rate cut during the Fed’s upcoming June meeting. Although some policymakers have hinted at potential rate reductions later this year, the Fed continues its cautious stance, assessing trade and economic dynamics while inflation persistently exceeds its 2% target.